Accounting Policies of Classic Diamonds (India) Ltd. Company

Mar 31, 2014

A Basis of Preparation of Financial Statements

The accounts have been prepared on the accrual basis of accounting,
under historical cost convention and in accordance with the generally
accepted accounting principles, Companies Accounting Standards notified
by the Central Government of India under the Companies (Accounting
Standards) Rules, 2006 and the provisions of Companies Act, 1956,
except where otherwise stated.

B Use of Estimates

The preparation of financial statements requires estimates and
assumptions to be made that affect the reported amount of assets and
liabilities on the date of the financial statements and the reported
amount of revenues and expenses during the reporting period. Difference
between the actual results and estimates are recognised in the period
in which the results are known/ materialised.

C Fixed Assets

Fixed Assets are carried on at cost of acquisition less accumulated
depreciation. Cost includes other direct/indirect and incidental
expenses incurred upto the date the asset is ready for its intended use
but excludes Cenvat availed on such assets. Depreciation has been
provided on written down value method of depreciation at the rates
prescribed under Schedule XIV to the Companies Act, 1956.

Depreciation is provided on pro-rata basis with reference to the date
of addition / installation / deletion except in case of assets costing
Rs 5,000/- or less, which are depreciated at 100% in the year of
acquisition.

D Impairment of Assets

An asset is treated as impaired when the carrying cost of asset exceeds
its recoverable value. An impairment loss is charged to the Profit and
Loss Account in the year in which an asset is identified as impaired.
The impairment loss recognised in prior accounting period is reversed
if there has been a change in the estimate of recoverable amount.

E Foreign Currency Transactions

Transactions denominated in foreign currencies are recorded at the
exchange rate prevailing on the date of the transaction or that
approximates the actual rate at the date of the transaction. Any income
or expense on account of exchange difference either on settlement is
recognised in the Profit and Loss account except in case of long term
liabilities, where they relate to acquisition of fixed assets, in which
case they are adjusted to the carrying cost of such assets. Monetary
items denominated in foreign currencies at the year end are not
restated at year end rates.

In respect of foreign exchange transactions covered by forward exchange
/ options contracts, the difference between the contract rate and the
exchange rate at date of the transaction is recognized as income or
expense over the life of the contract, except in respect of liabilities
incurred for acquiring fixed assets where such difference is adjusted
in carrying amount of respective fixed assets. Gains or losses on
cancellation or renewal of contracts are recognized as income or
expenses, except in respect of fixed assets where such gains or losses
are adjusted in carrying amount of the respective fixed assets.

F Inventories

Due to the short period of processing and / or manufacturing,
difficulty in identifying the stages of process and the insignificant
impact on valuation, goods in process, including polished diamonds, are
classified as raw materials for the purpose of classification and
valuation.

Valuation Raw Materials:

Rough diamonds are valued at the lower of cost and net realizable
value. The cost is determined on specific identification basis by
adding purchase price, commission on purchase and clearing charges and
by reducing the sale value of raw materials sold. Other items of raw
material are valued at cost on FIFO basis.

Finished Goods:

Polished diamonds are valued at estimated cost or estimated net
realizable value whichever is lower. cost is based on technical
estimate by the management to avoid distortion in valuation. In view of
the nature of variation in the values of individual diamonds and the
differential in their processing costs, it is not practicable to
compute the cost of polished diamonds using either FIFO or Weighted
average cost. In view of the numerous grades, it is not practicable to
use specific costs. The basis of computing cost used on consistent
basis though in line with generally accepted industry practice, is a
deviation from the method prescribed by Accounting Standard (AS) Â 2
''Valuation of Inventories''.

Jewellery is valued at lower of cost on weighted average basis or net
realized value.

Rough Rejection:

Rough Rejection Diamonds are valued at estimated realizable value.

Stores & Spares:

Stores and Spares are valued at the lower of cost or net realizable
value. Cost is determined on FIFO basis.

The impact on loss for the year, reserves and surplus and inventories
as at 31 March 2014, if any, due to the above deviations is not
ascertainable.

G Revenue Recognisition

The Company recognizes revenue on the sale of products, inclusive of
freight and insurance, if any, when the products are delivered to the
dealer / customer or when delivered to the carrier for export sales,
which is when risks and rewards of ownership pass to the dealer /
customer. Interest income is accounted on accrual basis.

Dividend income is accounted for when the right to receive is
established. Insurance claims and refund from governments are accounted
on realization basis.

H Employee Benefits

Short-term employee benefits are recognised as an expense in the Profit
and Loss Account of the year in which the related service is rendered.
Increamental gratuity liability calculated on the basis of 15 days last
drawn salary for each completed year of service is recognised as an
expense in the Profit and Loss Account. Liability for leave encashment
to staff and workers for the year is paid / provided in the year of
accrual.

I Investments

Long Term Investments are c arried at cost after deducting provision,
in cases where the fall in market value has been considered of
permanent nature. Current Investments are stated at lower of cost and
fair value. Net asset value of units declared by mutual funds is
considered as market value for non-exchange traded Mutual Funds.

J Provision for Taxation

Tax expense comprises of current and deferred tax. Current income taxes
are measured at the amount expected to be paid to the tax authorities
in accordance with the requirements of domestic laws of the respective
countries.

Deferred income taxes reflects the impact of current year timing
differences between taxable income and accounting income and reversal
of timing differences of earlier years.

Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets are recognized only to the extent that there is
reasonable/virtual certainty that sufficient future taxable income will
be available against which such deferred tax assets can be realized.

At each balance sheet date the Company re-assesses unrecognized
deferred tax assets. It recognizes unrecognized deferred tax assets to
the extent that it has become reasonably/virtually certain that
sufficient future taxable income will be available against which such
deferred tax assets can be realized.

K Borrowing Costs

Borrowing costs directly attributable to the acquisition or
construction of qualifying assets, as defined in AS Â 16 on "Borrowing
Cost" are capitalized as cost of the assets, up to the date the asset
is put to use. Other borrowing costs are charged to the Profit and Loss
Account in the year in which they are incurred.

L Earnings per share

The basic earnings per share ("EPS") is computed by dividing the net
profit after tax for the year available for the equity shareholders by
the weighted average number of equity shares outstanding during the
year. For the purpose of calculating diluted earnings per share, net
profit/(loss) after tax for the year available for equity shareholders
and the weighted average number of shares outstanding during the year
are adjusted for the effects of all dilutive potential equity shares.

M Impairment

At each balance sheet date, the Group determines whether a provision
should be made for impairment loss on fixed assets (including
intangible assets), by considering the indications that an impairment
loss may have occurred in accordance with Accounting Standard (AS) - 28
''Impairment of Assets''. Where the recoverable amount of any fixed
assets is lower than its carrying amount, a provision for impairment
loss on fixed assets is made. At the balance sheet date there is an
indication that previously assessed impairment loss no longer exists,
the recoverable amount is reassessed and the assets is reflected at the
recoverable amount subject to a minimum of depreciated historical cost.

N Provisions, Contingent Liabilities and Contingent Assets

The Company recognizes a provision when there is a present obligation
as a result of a past event that probably requires an outflow of
resources and a reliable estimate can be made of the amount of the
obligation. A disclosure for a contingent liability is made when there
is a possible obligation or a present obligation that may, but probably
will not, require an outflow of resources. Where there is a possible
obligation or a present obligation that the likelihood of outflow of
resources is remote, no provision or disclosure is made . Contingent
Assets are neither recognized nor disclosed in the financial
statements.

b) Terms/ rights attached to equity shares

The Company has only one class of equity shares having a par value of
Rs.2 per share. Each holder of equity shares is entitled to one vote
per share. Due to the losses incurred by the company, the Board of
Directors have not proposed any dividend in Current Year.

In the event of liquidation of the Company, the holders of the equity
shares will be entitled to receive remaining assets of the Company,
after distribution of all preferential amounts. The distribution will
be in proportion to the number of equity shares held by the
shareholders.

Working capital loans - from banks

Working capital loans from banks are secured by hypothecation of entire
current assets (first pari passu) of the Company, equitable mortgage by
deposit of title deeds of Land and factory building at Mumbai and surat
and office premises of the Company at various locations in mumbai and
office premises of two firms in which directors have significant
influence, corporate guarantee of two firms in which directors have
significant influence, personal guarantee of directors and lien on
fixed deposits.

Mar 31, 2013

A. Basis of Preparation of Financial Statements

The accounts have been prepared on the accrual basis of accounting,
under historical cost convention and in accordance with the generally
accepted accounting principles, Companies Accounting Standards notified
by the Central Government of India under the Companies (Accounting
Standards) Rules, 2006 and the provisions of Companies Act, 1956,
except where otherwise stated.

b. Use of Estimates

The preparation of financial statements requires estimates and
assumptions to be made that affect the reported amount of assets and
liabilities on the date of the financial statements and the reported
amount of revenues and expenses during the reporting period. Difference
between the actual results and estimates are recognized in the period
in which the results are known/ materialized.

c. Fixed Assets

Fixed Assets are carried on at cost of acquisition less accumulated
depreciation. Cost includes other direct/indirect and incidental
expenses incurred up to the date the asset is ready for its intended use
but excludes Cenvat availed on such assets. Depreciation has been
provided on written down value method of depreciation at the rates
prescribed under Schedule XIV to the Companies Act, 1956.

Depreciation is provided on pro-rata basis with reference to the date
of addition / installation / deletion except in case of assets costing
Rs 5,000/- or less, which are depreciated at 100% in the year of
acquisition.

d. Impairment of Assets

An asset is treated as impaired when the carrying cost of asset exceeds
its recoverable value. An impairment loss is charged to the Profit and
Loss Account in the year in which an asset is identified as impaired.
The impairment loss recognized in prior accounting period is reversed
if there has been a change in the estimate of recoverable amount.

e. Foreign Currency Transactions

Transactions denominated in foreign currencies are recorded at the
exchange rate prevailing on the date of the transaction or that
approximates the actual rate at the date of the transaction. Any income
or expense on account of exchange difference either on settlement is
recognised in the Profit and Loss account except in case of long term
liabilities, where they relate to acquisition of fixed assets, in which
case they are adjusted to the carrying cost of such assets. Monetary
items denominated in foreign currencies at the year end are not
restated at year end rates.

In respect of foreign exchange transactions covered by forward exchange
/ options contracts, the difference between the contract rate and the
exchange rate at date of the transaction is recognized as income or
expense over the life of the contract, except in respect of liabilities
incurred for acquiring fixed assets where such difference is adjusted
in carrying amount of respective fixed assets. Gains or losses on
cancellation or renewal of contracts are recognized as income or
expenses, except in respect of fixed assets where such gains or losses
are adjusted in carrying amount of the respective fixed assets.

f. Inventories ,

Due to the short period of processing and / or manufacturing,
difficulty in identifying the stages of process and the insignificant
impact on valuation, goods in process, including polished diamonds, are
classified as raw materials for the purpose of classification and
valuation.

Valuation Raw Materials:

Rough diamonds are valued at the lower of cost and net realizable
value. The cost is determined on specific identification basis by
adding purchase price, commission on purchase and clearing charges and
by reducing the sale value of raw materials sold. Other items of raw
material are valued at cost on FIFO basis.

Finished Goods:

Polished diamonds are valued at estimated cost or estimated net
realizable value whichever is lower, cost is based on technical
estimate by the management to avoid distortion in valuation. In view of
the nature of'' variation in the values of individual diamonds and the
differential in their processing costs, it is not practicable to
compute the cost of polished diamonds using either FIFO or Weighted
average cost. In view of the numerous grades, it is not practicable to
use specific costs. The basis of computing cost used on consistent
basis though in line with generally accepted industry practice, is a
deviation from the method prescribed by Accounting Standard (AS)-2
''Valuation of Inventories''.

Jewellery is valued at lower of cost on weighted average basis or net
realized value.

Rough Rejection:

Rough Rejection Diamonds are valued at estimated realizable value.

Stores & Spares:

Stores and Spares are valued at the lower of cost or net realizable
value. Cost is determined on FIFO basis.

The impact on loss for the year, reserves and surplus and inventories
as at 31 March 2013, if any, due to the above deviations is not
ascertainable. .

g. Revenue Recognition

The Company recognizes revenue on the sale of products, inclusive of
freight and insurance, if any, when the products are delivered to the
dealer / customer or when delivered to the carrier for export sales,
which is when risks and rewards of ownership pass to the dealer /
customer. Interest income is accounted on accrual basis. Dividend
income is accounted for when the right to receive is established.
Insurance claims and refund from governments are accounted on
realization basis.

h. Employee Benefits

Short-term employee benefits are recognized as an expense in the Profit
and Loss Account of the year in which the related service is rendered.
Incremental gratuity liability calculated on the basis of 15 days last
drawn salary for each completed year of service is recognized as an
expense in the Profit and Loss Account. Liability for leave encashment
to staff and workers for the year is paid / provided in the year of
accrual.

i. Investments

Long Term Investments are carried at cost after deducting provision, in
cases where the fall in market value has been considered of permanent
nature. Current Investments are stated at lower of cost and fair value.
Net asset value of units declared by mutual funds is considered as
market value for non-exchange traded Mutual Funds.

j. Provision for Taxation

Tax expense comprises of current and deferred tax. Current income taxes
are measured at the amount expected to be paid to the tax authorities
in accordance with the requirements of domestic laws of the respective
countries. Deferred income taxes reflects the impact of current year
timing differences between taxable income and accounting income and
reversal of timing differences of earlier years.

Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets are recognized only to the extent that there is
reasonable/virtual certainty that sufficient future taxable income will
be available against which such deferred tax assets can be realized.

At each balance sheet date the Company re-assesses unrecognized
deferred tax assets. It recognizes unrecognized deferred tax assets to
the extent that it has become reasonably/virtually certain that
sufficient future taxable income will be available against which such
deferred tax assets can be realized.

k. Borrowing Costs

Borrowing costs directly attributable to the acquisition or
construction of qualifying assets, as defined in AS -16 on "Borrowing
Cost" are capitalized as cost of the assets, up to the date the asset
is put to use. Other borrowing costs are charged to the Profit and Loss
Account in the year in which they are incurred.

I. Earnings per share

The basic earnings per share ("EPS") is computed by dividing the
net profit after tax for the year available for the equity shareholders
by the weighted average number of equity shares outstanding during the
year. For the purpose of calculating diluted earnings per share, net
profit/(loss) after tax for the year available for equity shareholders
and the weighted average number of shares outstanding during the year
are adjusted for the effects of all dilutive potential equity shares.

m. Impairment

At each balance sheet date, the Group determines whether a provision
should be made for impairment loss on fixed assets (including
intangible assets), by considering the indications that an impairment
loss may have occurred in accordance with Accounting Standard (AS) - 28
''Impairment of Assets''. Where the recoverable amount of any fixed
assets is lower than its carrying amount, a provision for impairment
loss on fixed assets is made. At the balance sheet date there is an
indication that previously assessed impairment loss no longer exists,
the recoverable amount is reassessed and the assets is reflected at the
recoverable amount subject to a minimum of depreciated historical cost.

n. Provisions, Contingent Liabilities and Contingent Assets

The Company recognizes a provision when there is a present obligation
as a result of a past event that probably requires an outflow of
resources and a reliable estimate can be made of the amount of the
obligation. A disclosure for a contingent liability is made when there
is a possible obligation or a present obligation that may, but probably
will not, require an outflow of resources. Where there is a possible
obligation or a present obligation that the likelihood of outflow of
resources is remote, no provision or disclosure is made. Contingent
Assets are neither recognized nor disclosed in the financial
statements.

Mar 31, 2010

1. GENERAL

1.1 The Accounts have been prepared on historical cost basis ignoring
changes, if any, in the purchasing power of money.

1.2 All revenues and expenses are accounted on accrual basis except to
the extent stated otherwise. Insurance claims and refund from
governments are accounted for on realization basis.

2. FIXED ASSETS AND DEPRECIATION:

2.1 Fixed assets are stated at cost of acquisition and includes other
direct/indirect and incidental expenses incurred to put them into use,
but excludes Cenvat availed on such assets.

2.2 Depreciation on fixed assets has been provided on Written Down
Value basis at the rates and in the manner specified in Schedule XIV to
the Companies Act, 1956.

2.3 Depreciation is provided on pro-rata basis with reference to the
date of addition / installation / deletion except in case of assets
costing Rs 5,000/- or less, which are depreciated at 100% in the year
of acquisition.

3. INVENTORIES:

3.1 Due to the short period of processing and / or manufacturing,
difficulty in identifying the stages of process and the insignificant
impact on valuation, goods in process, including polished diamonds, are
classified as raw materials for the purpose of classification and
valuation.

3.2 VALUATION:

a) RAW MATERIALS:

Diamonds (including in process) are valued at cost on specific
identification basis. Other items of raw material are valued at cost on
FlFO basis.

b) FINISHED GOODS:

Polished diamonds are valued at estimated cost or estimated net
realizable value whichever is lower. In view of the nature of variation
in the values of individual diamonds and the differential in their
processing costs, it is not practicable to compute the cost of polished
diamonds using either FIFO or Weighted average cost. In view of the
numerous grades, it is not practicable to use specific costs. The
method of valuation is therefore in compliance with "AS-2" issued by
the Institute of Chartered Accountants of India to the extent
practicable.

Jewellery is valued at lower of cost on weighted average basis or net
realized value.

c) ROUGH REJECTION:

Rough Rejection Diamonds are valued at estimated realizable value.

d) STORES AND SPARES:

Stores and Spares are valued at cost.

4. SUNDRY DEBTORS AND RECEIVABLES:

Sundry debtors, loans and advances are stated at the value if realised
in the ordinary course of business. Irrecoverable amounts, if any, are
accounted and / or provided for as per managements judgement or only
upon final settlement of accounts with the parties.

5. INVESTMENT:

5.1 Long Term Investments are carried at cost after deducting
provision, in cases where the fall in market value has been considered
of permanent nature.

5.2 Current Investments are stated at lower of cost and fair value.

6. FOREIGN CURRENCY TRANSACTIONS:

6.1 Transactions in foreign currency are accounted at the exchange rate
prevailing on the date the transactions have taken place.

6.2 Gain or loss upon settlement of transaction during the year is
recognized in Profit and Loss account except in respect of foreign
exchange liabilities in relation to fixed assets where such gains or
losses are adjusted in carrying amount of respective fixed assets.

6.3 Assets and Liabilities denominated in foreign currency are restated
at the year-end rates. Gains or losses arising as a result of above are
recognized in Profit and Loss account except in respect of foreign
exchange liabilities in relation to fixed assets where such gains or
losses are adjusted in carrying amount of respective fixed assets.

* The difference between the contract rate and the exchange rate at
date of the transaction is recognized as income or expense over the
life of the contract, except in respect of liabilities incurred for
acquiring fixed assets where such difference is adjusted in carrying
amount of respective fixed assets.

* The difference between the exchange rate at date of the transaction
and year-end exchange rate is recognized as income or expense in Profit
and Loss account, except in respect of liabilities incurred for
acquiring fixed assets where such difference is adjusted in carrying
amount of respective fixed assets.

* Gains or losses on cancellation or renewal of contracts are
recognized as income or expenses, except in respect of fixed assets
where such gains or losses are adjusted in carrying amount of the
respective fixed assets.

7. RETIREMENT BENEFITS:

7.1 Liability for gratuity on retirement is accounted based on the
assumption that such benefits are payable to all eligible employees at
the end of the accounting year.

7.2 Liability for leave encashment to staff and workers for the year is
paid / provided in the year of accrual.

8. SALES:

Sales are inclusive of freight and insurance, if any.

9. BORROWING COST:

Borrowing costs directly attributable to the acquisition or
construction of qualifying assets, as defined in AS -16 on "Borrowing
Cost" are capitalized as cost of the assets, up to the date the asset
is put to use. Other borrowing costs are charged to the Profit and Loss
Account in the year in which they are incurred.

10. IMPAIRMENT OF ASSETS:

An asset is treated as impaired when the carrying cost of assets
exceeds its recoverable value. Where there is an indication that an
assets is impaired, the recoverable amount, if any, is estimated and
impairment loss is recognized to the extent of carrying amount exceed
recoverable amount.

11. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS:

Provisions involving substantial degree of estimation in measurement
are recognized when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
Contingent Liabilites are not recognized but are disclosed in the
notes. Contingent Assets are neither recognized nor disclosed in the
financial statements.

12. TAXATION:

12.1 Provision for current Income - Tax is made on the basis of the
estimated Taxable Income for the current year in accordance with the
provisions of the Income Tax Act, 1961.

12.2 Deferred Tax resulting from timing differences between book and
tax profits is accounted for under the liability method, at the current
rate of tax, to the extent that the timing differences are expected to
crystallize. Deferred Tax Assets are recognized for all deductible
timing differences and carried forward to the extent there is
reasonable certainty that sufficient future taxable profit will be
available against which such deferred tax assets can be realized.